December 31, 2018 / 10:14 AM / 6 months ago

PRECIOUS-Gold hits six-month peak but heads for first annual drop since 2015

(Updates prices)

* Gold and silver set for best month since January 2017

* Palladium the only 2018 gainer in precious complex

* Platinum suffers worst year since 2015

* GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl

By Sethuraman N R

BENGALURU, Dec 31 (Reuters) - Gold scaled a six-month peak on Monday but was poised for its first annual decline since 2015 after losing out this year to dollar strength linked to the Sino-U.S. trade conflict and rising interest rates.

Spot gold rose 0.2 percent to $1,283.10 an ounce at 1323 GMT, with a dip in the dollar helping to lift the metal to its highest since June 15. U.S. gold futures were up 0.2 percent at $1,285.50.

However, spot prices are still down 1.5 percent in the year to date.

“Gold started well in 2018, but a recovery in the U.S. dollar weakened prices and uncertainty on the U.S-China trade front weakened the yuan, further pulling gold down,” said ABN AMRO analyst Georgette Boele.

Some stabilisation in the yuan and weakness in dollar has helped the recent recovery in gold, she said, which has put the metal on track for its best December in a decade. “We expect gold prices to hit $1,400 next year,” she added.

The dollar eased 0.2 percent against a basket of currencies on Monday after U.S. President Donald Trump indicated over the weekend that a possible trade deal between the United States and China was progressing well.

However the U.S. currency was still set to close the year up nearly 5 percent against its rivals, lifted by trade tensions and rising interest rates.

Its strength helped send gold to a 20-month low in August but the metal has since recovered some ground, jumping about 5 percent in December due in part to wild swings in equities which analysts said boosted its appeal as a safe store of value.

Political and economic considerations will support prices into the first quarter of 2019, Benjamin Lu Jiaxuan, commodities analyst at Singapore-based brokerage firm Phillip Futures, said.

The outlook for the dollar is also more subdued going into 2019, with growing expectations that a three-year rate hiking cycle in the United States has come to a close. Markets currently expect no rate hikes next year.

Elsewhere autocatalyst metal palladium was up 0.1 percent at $1,255.10 an ounce, taking its gain for the year to 18.3 percent and making it the best-performing of the major precious metals for the third year in a row.

This year it also surpassed gold for the first time since 2002 on strong demand from makers of catalytic converters.

“The key driver in this strength has been growing demand from the auto sector with stricter pollution standards in China increasing the amount of palladium used in auto catalysts,” ING said in its commodities outlook for next year.

Silver rose 1 percent to $15.49 an ounce in the session but was down 8.8 percent for 2018.

Platinum edged up by 0.8 percent to $795.60, making little impact on a decline of about 14 percent for the year.

Reporting by Nallur Sethuraman in Bengaluru Editing by David Goodman and Jan Harvey

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